Biostime amends Chinese infant formula distribution contracts amidst anti-trust probe

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Infant formula, Infant formula products, China, Hong kong

Biostime amends infant formula contracts amidst China anti-trust probe
Chinese infant formula manufacturer Biostime has made amendments to the contracts it holds with distributors to delete terms that guarantee fixed prices and price floors that may violate Chinese anti-trust laws. 

In a statement filed with the Stock Exchange of Hong Kong yesterday, the Guangzhou, China-based infant formula manufacturer announced that it has “amended relevant terms”​ in distributor contracts in order to comply with the Anti-Monopoly Law of the People’s Republic of China.

The amendments “mainly include the deletion of those terms in relation to fixed prices and price floors,” ​the company said.

It added that it has “entered into new distribution agreements with all its distributors to substitute the previous distribution agreements."

Biostime's decision to amend the terms of its distributor contracts follows the launch of an investigation by the Chinese National Development and Reform Commission (NDRC) into the high pricing of infant formula and suspected anti-trust violations by several manufacturers.

The company admitted earlier this month that the fixed prices and price floors detailed in its agreements with distributors “may”​ have violated Chinese anti-trust rules.

"Enhance" business partners’ confidence

Alongside the amendments to its distributor contracts, Biostime has slashed the prices of its infant formula products by up to 10%.

“In order to deepen the rewarding to consumers of our products and further enhance our business partners’ confidence, Biostime Guangzhou will lower the ex-factory prices and suggested prices of its infant formula products, with effect from 27 July 2013,” ​the Stock Exchange of Hong Kong filing said.

The price of all Biostime’s stage four pre-school infant formula products, which are developed for children between the age of three and seven years, will be lowered by 10%.

While prices of stages one (zero to 12 months), two (six to 18 months), and three (one to three years) of Biostime’s Supreme and Supreme Care infant formula products will be cut by 5%.

Investigation “on-going”

Alongside Biostime, Nestlé-owned Wyeth Nutrition, Danone Dumex, Mead Johnson Nutrition, FrieslandCampina, and Abbott Laboratories have confirmed that their pricing practices in China are under investigation by the NDRC.

New Zealand-based dairy exporter, Fonterra, also revealed that it was “contacted”​ by the NDRC regarding the investigation.

In response, Wyeth Nutrition, Danone Dumex, Mead Johnson Nutrition, Abbott Laboratories, and FrieslandCampina have announced plans to slash their infant formula prices in the country. Fonterra, which does not yet sell infant formula in China, also slashed the cost of its Anmum maternal health products in the country by 9%.

In yesterday's statement, Biostime confirmed that “the Investigation is still on-going,” ​adding that it will continue to “actively cooperate with the Investigation.”

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